CBP Final Rule Removes Distinction Between 9802.00.80 Preservative and Decorative Painting
U.S. Customs and Border Protection has issued a final rule that will amend 19 CFR 10.16 effective July 14, 2008 in order to remove the distinction between preservative and decorative painting for purposes of the partial duty exemption under HTS subheading 9802.00.80.
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Change Made to Conform Regulations with DaimlerChrysler Court Ruling
CBP states that this change conforms the CBP regulations to a court ruling that found the regulatory distinction between preservative and decorative painting currently set forth in 19 CFR 10.16 to be invalid.
The U.S. Court of Appeals for the Federal Circuit had ruled that HTS 9802.00.80 unambiguously provides that painting is an operation incidental to the assembly process, thus making CBP's regulatory distinction invalid.
(In DaimlerChrysler Corporation v. U.S., Daimler sought a partial duty exemption for imported automobiles that were painted and assembled in Mexico using U.S. origin sheet metal. Daimler claimed the painting performed on the sheet metal in Mexico should be considered incidental to the assembly process under HTS 9802.00.80.)
19 CFR Distinction Between Preservative and Decorative Painting Removed
CBP will amend the list of operations considered incidental to the assembly process in 19 CFR 10.16(b) so that (3) reads as follows (deleted text, added text):
"Application of preservative paint or preservative coating, including preservative metallic coating, lubricants, or protective encapsulation;"
The final rule will also delete 19 CFR 10.16(c)(3), which states that "Painting primarily intended to enhance the appearance of an article or to impart distinctive features or characteristics" is an operation not incidental in the assembly process.
(19 CFR 10.16(c)(4) and (c)(5) will be redesignated as paragraphs (c)(3) and (c)(4), respectively.)
Also, the world "shall" will be replaced with the word "will" in 19 CFR 10.16(b) and (c) (the introductory paragraphs on operations incidental to the assembly process and operations not incidental to the assembly process, respectively.)
1HTS 9802.00.80 provides a partial duty exemption for articles assembled abroad in whole or in part of fabricated components, the products of the U.S. which:
(a) were exported in condition ready for assembly without further fabrication; (b) have not lost their physical identity in such articles by change in form, shape, or otherwise; and, (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubricating, and painting.
The regulations implementing HTS 9802.00.80 are found 19 CFR 10.11-10.26.
(See ITT's Online Archives 03/24/04 news, 04032410, for BP summary of CAFC's 2004 DaimlerChrysler decision.
See ITT's Online Archives or 08/01/07 news, 07080125, for BP summary of the CAFC ruling against DaimlerChrysler on certain protests not listed on the original summons.)
CBP contact- Gerry O'Brien (202) 572-8792
CBP final rule (CBP Dec. 08-21) available at http://edocket.access.gpo.gov/2008/pdf/E8-13203.pdf